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                                                                    EXHIBIT 10.5

                         INTERMOUNTAIN COMMUNITY BANCORP

                           DIRECTOR STOCK OPTION PLAN

1.       PURPOSE OF THE PLAN. The purpose of this Director Stock Option Plan
         ("Plan") is to provide additional incentives to Directors of Panhandle
         Bancorp, an Idaho corporation ("Bancorp"), thereby helping to attract
         and retain the best available personnel for positions as directors of
         Bancorp and otherwise promoting the success of the business activities
         of Bancorp. Bancorp intends that Options issued under this Plan will
         constitute nonqualified stock options.

2.       DEFINITIONS. As used in this Plan, the following definitions apply:

         a.       "Bancorp" has the meaning set forth in paragraph 1 of this
                  Plan.

         b.       "Board" means the Board of Directors of Bancorp.

         c.       "Common Stock" means Bancorp's common stock, currently with a
                  par value of $2.50 per share.

         d.       "Committee" has the meaning set forth in subparagraph 4(a) of
                  this Plan.

         e.       "Continuous Status as a Director" means the absence of any
                  interruption or termination of service as a Director.

         f.       "Date of Grant" means of an Option means the date on which the
                  Committee makes the determination granting such Option, or
                  such later date as the Committee may designate. The Date of
                  Grant shall be specified in the Option agreement.

         g.       "Director" means any person serving as a member of the Board
                  of Bancorp.

         h.       "Exercise Price" has the meaning set forth in subparagraph
                  4(b)(2) of this Plan.

         i.       "Option" means a stock option granted under this Plan, which
                  constitutes a nonqualified stock option.

         j.       "Optionee" means a Director who receives an Option.

         k.       "Plan" has the meaning set forth in paragraph 1 of this Plan.

         l.       "Parent" means any corporation owning at least eighty percent
                  (80%) of the total voting power of the issued and outstanding
                  stock of Bancorp, and eighty percent (80%) of the total value
                  of the issued and outstanding stock of Bancorp.

         m.       "Subsidiary" means any bank or other corporation of which not
                  less than fifth percent (50%) of the voting shares are held by
                  Bancorp or a Subsidiary, whether

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                  or not such corporation now exists or is hereafter organized
                  or acquired by Bancorp or a Subsidiary.

3.       STOCK SUBJECT TO OPTIONS.

         a.       Number of Shares Reserved. The maximum number of shares which
                  may be optioned and sold under this Plan is 50,000 shares of
                  the Common Stock of Bancorp (subject to adjustment as provided
                  in subparagraph 6(j) of this Plan). During the term of this
                  Plan, Bancorp will at all times reserve and keep available a
                  sufficient number of shares of its Common Stock to satisfy the
                  requirements of this Plan.

         b.       Expired Options. If any outstanding Option expires or becomes
                  unexercisable for any reason without having been exercised in
                  full, the shares of Common Stock allocable to the unexercised
                  portion of such Option will again become available for other
                  Options.

4.       ADMINISTRATION OF THE PLAN.

         a.       The Committee. The Board will administer this Plan directly,
                  acting as a Committee of the whole, or if the Board elects, by
                  a separate Committee appointed by the Board for that purpose
                  and consisting of at least three Board members. All references
                  in the Plan to the "Committee" refers to this separate
                  Committee, if any is established, or if none is then in
                  existence, refers to the Board as a whole. Once appointed, any
                  Committee will continue to serve until otherwise directed by
                  the Board. From time to time, the Board may increase the size
                  of the Committee and appoint additional members, remove
                  members (with or without cause), appoint new members in
                  substitution, and fill vacancies however caused. The Committee
                  will select one of its members as chairman, and will hold
                  meetings at such times and places as the chairman or a
                  majority of the Committee may determine. At all times, the
                  Board will have the power to remove all members of the
                  Committee and thereafter to directly administer this Plan as a
                  Committee of the whole.

                  (1)      Members of the Committee who are eligible for Options
                           or who have been granted Options will be counted for
                           all purposes in determining the existence of a quorum
                           at any meeting of the Committee and will be eligible
                           to vote on all matters before the Committee
                           respecting the granting of Options or administration
                           of this Plan.

                  (2)      At least annually, the Committee must present a
                           written report to the Board indicating the Directors
                           to whom Options have been granted since the date of
                           the last such report, and in each case the Date of
                           Grant, the number of shares optioned, and the
                           per-share Exercise Price.

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         b.       Powers of the Committee. All actions of the Committee must be
                  either (i) by a majority vote of the members of the full
                  Committee at a meeting of the Committee, or (ii) by unanimous
                  written consent of all members of the full Committee without a
                  meeting. All decisions, determinations and interpretations of
                  the Committee will be final and binding on all persons,
                  including all Optionees and any other holders or persons
                  interested in any Options, unless otherwise expressly
                  determined by a vote of the majority of the entire Board. No
                  member of the Committee or of the Board will be liable for any
                  action or determination made in good faith with respect to the
                  Plan or any Option. Subject to all provisions and limitations
                  of the Plan, the Committee will have the authority and
                  discretion:

                  (1)      to determine the Directors to whom Options are to be
                           granted, the Dates of Grant, and the number of shares
                           to be represented by each Option;

                  (2)      to determine the price at which shares of Common
                           Stock are to be issued under an Option, subject to
                           subparagraph 6(b) of this Plan ("Exercise Price");

                  (3)      to determine all other terms and conditions of each
                           Option granted under this Plan (including
                           specification of the dates upon which Options become
                           exercisable, and whether conditioned on performance
                           standards, periods of service or otherwise), which
                           terms and conditions can vary between Options;

                  (4)      to modify or amend the terms of any Option previously
                           granted, or to grant substitute Options, subject to
                           subparagraphs 6(l) and 6(m) of this Plan;

                  (5)      to authorize any person or persons to execute and
                           deliver Option agreements or to take any other
                           actions deemed by the Committee to be necessary or
                           appropriate to effect the grant of Options by the
                           Committee;

                  (6)      to interpret this Plan and to make all other
                           determinations and take all other actions which the
                           Committee deems necessary or appropriate to
                           administer this Plan in accordance with its terms and
                           conditions.

5.       ELIGIBILITY. Options may be granted only to Directors. Granting of
         Options under this Plan will be entirely discretionary with the
         Committee. Adoption of this Plan will not confer on any Director any
         right to receive any Option or Options under this Plan unless and until
         said Options are granted by the Committee, in its sole discretion.
         Neither the adoption of this Plan nor the granting of any Options under
         this Plan will confer upon any Director or Optionee any right with
         respect to continuation of status as a Director, nor will the same
         interfere in any way with his or her right or with the right of the
         shareholders of Bancorp or any Subsidiary to terminate his or her
         status as a Director at any time.

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6.       TERMS AND CONDITIONS OF OPTIONS. All Options granted under this Plan
         must be authorized by the Committee, and must be documented in written
         Option agreements in such form as the Committee will approve from time
         to time, which agreements must comply with and be subject to all of the
         following terms and conditions:

         a.       Number of Shares. Each Option agreement must state the number
                  of shares subject to Option. Any number of Options may be
                  granted to a single eligible Director at any time and from
                  time to time.

         b.       Exercise Price and Consideration. Each option agreement must
                  state the Exercise Price for the shares of Common Stock to be
                  issued under the Option, which price must be not less than the
                  greater of (1) the fair market value of the Common Stock or
                  (2) the net book value of the Common Stock at the time of
                  grant, as is determined by the Committee. The Exercise Price
                  is payable either (i) in United States dollars upon exercise
                  of the Options, or (ii) if approved by the Board or Committee,
                  other consideration including without limitation Common Stock
                  of Bancorp, services, or other property.

         c.       Term of Option. Subject to other applicable provisions of this
                  Plan including but not limited to subparagraphs 6(g), 6(h) and
                  6(i), the term of each Option will be determined by the
                  Committee in its discretion.

         d.       Non-transferability of Options. No Option may be sold,
                  pledged, assigned, hypothecated, transferred, or disposed of
                  in any manner other than by will or by the laws of descent or
                  distribution and may be exercised, during the lifetime of the
                  Optionee, only by the Optionee.

         e.       Manner of Exercise. An Option will be deemed to be exercised
                  when written notice of exercise has been given to Bancorp in
                  accordance with the terms of the Option by the person entitled
                  to exercise the Option, together with full payment for the
                  shares of Common Stock subject to said notice.

         f.       Rights as Shareholder. An Optionee shall have none of the
                  rights of a shareholder with respect to any shares covered by
                  his or her Option unless and until the Optionee has exercised
                  such Option and submitted full payment for the shares.

         g.       Death of Optionee. In the event of the death of an Optionee
                  who at the time of his or her death was a Director and who had
                  been in Continuous Status as a Director since the Date of
                  Grant of the Option, the Option will terminate on the earlier
                  of (i) one year after the date of death of the Optionee, or
                  (ii) the expiration date otherwise provided in the Option
                  agreement, except that if the expiration date should occur
                  during the 180-day period immediately following the Optionee's
                  death, such Option will terminate at the end of such 180-day
                  period. The Option will be exercisable at any time prior to
                  such termination by the Optionee's estate, or by such person
                  or persons who have acquired the right to exercise the Option
                  by bequest or by inheritance or by reason of the death of the
                  Optionee.

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         h.       Disability of Optionee. If an Optionee's status as a Director
                  is terminated at any time during the Option period by reason
                  of a disability (within the meaning of Section 22(e)(3) of the
                  Internal Revenue Code) and if said Optionee had been in
                  Continuous Status as a Director at all times between the Date
                  of Grant of the Option and the termination of his or her
                  status as a Director, his or her Option will terminate on the
                  earlier of (i) one year after the date of termination of his
                  or her status as a Director, or (ii) the expiration date
                  otherwise provided in his or her Option agreement.

         i.       Termination of Status as a Director.

                  (1)      If an Optionee's status as a Director is terminated
                           at any time after the grant of an Option to such
                           Director for any reason other than death or
                           disability, as provided in subparagraphs 6(g) and
                           6(h) of this Plan, and excepting if the Director is
                           removed for cause, as provided in subparagraph (2)
                           below, such Option will terminate on the earlier of
                           (i) the same day of the sixth month after the date of
                           termination of his or her status as a Director, or
                           (ii) the expiration date otherwise provided in his or
                           her Option agreement.

                  (2)      If an Optionee is removed as a Director for cause at
                           any time after the grant of an Option to such
                           Director, then such Option will terminate on the date
                           of termination of his or her status as a Director.
                           For this purpose, cause will be deemed to exist only
                           if the Board has reasonable grounds to believe that
                           Bancorp has suffered or will suffer substantial
                           injury as a result of the gross negligence or
                           dishonesty of the Director who is removed.

         j.       Adjustments Upon Changes in Capitalization. Subject to any
                  required action by the shareholders of Bancorp, the number of
                  shares of Common Stock covered by each outstanding Option, the
                  number of shares of Common Stock available for grant of
                  additional Options, and the per-share Exercise Price in each
                  outstanding Option, will be proportionately adjusted for any
                  increase or decrease in the number of issued shares of Common
                  Stock resulting from any stock split or other subdivision or
                  consolidation of shares, the payment of any stock dividend
                  (but only on the Common Stock) or any other increase or
                  decrease in the number of such shares of Common Stock effected
                  without receipt of consideration by Bancorp; provided,
                  however, that conversion of any convertible securities of
                  Bancorp will not be deemed to have been "effected without
                  receipt of consideration." Such adjustment will be made by the
                  Committee, whose determination in that respect will be final,
                  binding and conclusive.

                  (1)      Except as otherwise expressly provided in this
                           subparagraph 6(j), no Optionee will have any rights
                           by reason of any stock split or the payment of any
                           stock dividend or any other increase or decrease in
                           the number of shares of Common Stock, and no issuance
                           by Bancorp of shares of stock

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                           of any class, or securities convertible into shares
                           of stock of any class, will affect the number of
                           shares or Exercise Price subject to any Options, and
                           no adjustments in Options will be made by reason
                           thereof. The grant of an Option under this Plan will
                           not affect in any way the right or power of Bancorp
                           to make adjustments, reclassifications,
                           reorganizations or changes of its capital or business
                           structure.

         k.       Conditions Upon Issuance of Shares. Shares of Common Stock
                  will not be issued with respect to an Option granted under
                  this Plan unless the exercise of such Option and the issuance
                  and delivery of such shares pursuant thereto will comply with
                  all applicable provisions of law, including applicable federal
                  and state securities laws. As a condition to the exercise of
                  an Option, Bancorp may require the person exercising such
                  Option to represent and warrant at the time of exercise that
                  the shares of Common Stock are being purchased only for
                  investment and without any present intention to sell or
                  distribute such Common Stock if, in the opinion of counsel for
                  Bancorp, such a representation is required by any of the
                  aforementioned relevant provisions of law.

         l.       Corporate Sale Transactions. In the event of the merger or
                  reorganization of Bancorp with or into any other corporation,
                  the sale of substantially all of the assets of Bancorp, or a
                  dissolution or liquidation of Bancorp (collectively, "Sale
                  Transaction"), (1) all outstanding Options that are not then
                  fully exercisable will become exercisable upon the date of
                  closing of any sale transaction or such earlier date as the
                  Committee may fix; and (2) the Committee may, in the exercise
                  of its sole discretion, terminate all outstanding Options as
                  of a date fixed by the Committee. In such event, however, the
                  Committee must notify each Optionee of such action in writing
                  not less than sixty (60) days prior to the termination date
                  fixed by the Committee, and each Optionee must have the right
                  to exercise his or her Option prior to said termination date.

         m.       Substitute Stock Options. In connection with an internal
                  reorganization of Bancorp, the Committee is authorized, in its
                  discretion, to substitute for any unexercised Option, a new
                  option for shares of the resulting entity's stock.

         n.       Tax Compliance. Bancorp, in its sole discretion, may take
                  actions reasonably believed by it to be required to comply
                  with any local, state, or federal tax laws relating to the
                  reporting or withholding of taxes attributable to the grant or
                  exercise of any Option or the disposition of any shares of
                  Common Stock issued upon exercise of an Option, including, but
                  not limited to (i) withholding from any Optionee exercising an
                  Option a number of shares of Common Stock having a fair market
                  value equal to the amount required to be withheld by Bancorp
                  under applicable tax laws, and (ii) withholding from any form
                  of compensation or other amount due an Optionee, or holder, of
                  shares of Common Stock issued upon exercise of an Option any
                  amount required to be withheld by Bank under applicable tax
                  laws. Withholding or reporting will be considered required for

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                  purposes of this subparagraph if the Committee, in its sole
                  discretion, so determines.

         o.       Other Provisions. Option agreements executed under this Plan
                  may contain such other provisions as the Committee will deem
                  advisable.

7.       TERM OF THE PLAN. This Plan will become effective and Options may be
         granted upon the Plan's approval by the Board, subject to shareholder
         approval. Unless sooner terminated as provided in subparagraph 7(a) of
         this Plan, this Plan will terminate on the tenth (10th) anniversary of
         its effective date. Options may be granted at any time after the
         effective date and prior to the date of termination of this Plan.

         a.       Amendment or Early Termination of the Plan. The Board may
                  terminate this Plan at any time. The Board may amend this Plan
                  at any time and from time to time in such respects as the
                  Board may deem advisable, except that, without approval of the
                  shareholders, no revision or amendment will increase the
                  number of shares of Common Stock subject to this Plan other
                  than in connection with an adjustment under subparagraph 6(j)
                  of this Plan.

         b.       Effect of Amendment or Termination. No amendment or
                  termination of this Plan will affect Options granted prior to
                  such amendment or termination, and all such Options will
                  remain in full force and effect notwithstanding such amendment
                  or termination.

8.       SHAREHOLDER APPROVAL. Adoption of this Plan will be subject to
         ratification by affirmative vote of shareholders owning at least a
         majority of the outstanding Common Stock of Bancorp at a duly convened
         meeting.

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                             CERTIFICATE OF ADOPTION

         I certify that the foregoing Director Stock Option Plan was approved by
the Board of Directors of Panhandle Bancorp on January 14, 1999.

                                          /s/ Terry L. Merwin
                                          -----------------------------
                                          Terry L. Merwin, Secretary

         I further certify that the foregoing Director Stock Option Plan was
approved by the shareholders of Panhandle Bancorp on August 18, 1999.

                                          /s/ Terry L. Merwin
                                          ---------------------------------
                                          Terry L. Merwin, Secretary

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